An inventory error is sometimes said to be self-correcting because it yields an offsetting error in the next period.

Question

Quizplus · Accepted Answer

This statement is true. An inventory error that results in an overstatement or understatement of inventory in one period is likely to result in the opposite error in the next period, helping to correct the initial error. For example, if inventory is overstated in one period, the next period's inventory will likely be understated by the same amount, resulting in a self-correction of the error.

An Inventory Error Is Sometimes Said to Be Self-Correcting Because